Before its smart locks were in one in every 10 new U.S. apartment units under construction, Latch started small: the front door of its co-founder's Lower East Side apartment.

CEO Luke Schoenfelder was moving into a prewar building in 2015, two years before his company brought its product to market. He talked his real estate broker into letting him swap out the brass lock on his front door for a prototype by his company, which unlocks doors via smartphone, key card or punch code.

By the time he moved out earlier this year, the rest of the building was using his locks—as were several others on the block.

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"To walk to the subway every day the same way for four years and keep seeing these new Latch buildings go up on my commute was just surreal," he said.

The company is primed to grow after closing a $126 million funding round last month, but there have been growing pains. A lawsuit against a landlord who had installed the smart locks in Hell’s Kitchen earlier this year prompted concern from some city residents and elected officials, who fear Latch (which was not named in the suit) and its rivals could bring the privacy concerns of the digital age to their front doors.

Partnerships with big developers Toll Brothers, RXR Realty and Brookfield have allowed Latch’s smart locks to proliferate. Schoenfelder pitches the company’s product as an “access system.” The technology’s ability to allow access via app or shared codes, he said, could be key in complementing on- demand services such as grocery delivery, dog walking and Airbnb.

Schoenfelder started his tech career on the policy team at Apple, focused on privacy. Latch was founded in 2014, when Thomas Meyerhoffer, a former product designer at Apple, joined with Schoenfelder and co-founder Brian Jones. The company raised about $26 million to bring its line of three locks to market.

Latch sells directly to landlords and property managers. The company charges $400 per device, on average, and a typical customer buys 180 per building, Schoenfelder said.

On the StreetEasy page for Brookfield’s One Blue Slip apartment building, Latch’s keyless entry is listed as an amenity, along with concierge service and valet parking.

Lana Alexander, community manager for the Otto apartment development in Greenpoint, said Latch locks on the building’s 180 units help residents navigate the property. When visiting the pool or the gym, she said, “you don’t have that headache of, ‘Where I am going to put my keys?’ ”

For the management of the new building, Alexander said Latch made it easier to coordinate access for subcontractors and new tenants.

UPS and Walmart’s jet.com have deals with Latch that help facilitate package-delivery to buildings without doormen. Walmart subsidized the installation of Latch locks in 1,000 New York buildings. The agreements have helped Latch grow its number of total contracted units 200% year-over-year, a spokeswoman said.

Privacy concerns

As it expands, Latch will have to answer consumers’ concerns about how their personal data is handled. Five residents of a Hell’s Kitchen loft building sued their landlord this year for installing Latch locks and reportedly not offering a physical key to parts of the building.

The two sides eventually settled, with the landlord agreeing to provide a physical key to all locks—an option Latch does offer. Latch was not named in the suit, but coverage in The New York Times, New York Post and elsewhere brought new scrutiny.

“I don’t want my landlord to know when I or my kids are coming in or out,” Benjamin Dulchin, executive director of the Association for Neighborhood and Housing Development, told the Times in March.

Latch’s privacy policy clarifies that landlords can see when residents enter certain common areas, such as the gym or the lobby, but not when individual apartments are opened or closed. The company does not share user data with third parties, such as advertisers.

Assemblywoman Linda Rosenthal, a Democrat who represents Hell’s Kitchen, proposed a bill last session that would require landlords to provide a “traditional” method of entry to all areas of a building while placing limits on the data that digital home-access companies can collect.

“We see frequently that the law has to hurry to catch up with what is already going on in society,” Rosenthal said.

“We are trying to move before everything gets out of hand and there are reams of data.”

She is expected to reintroduce the bill next year. City Councilman Mark Levine said he is drafting a similar bill.

Schoenfelder said his company supports legislation that protects consumer privacy, including San Francisco’s ban of facial recognition technology. He pointed to the company’s recent hiring of Michael Barrett, the former information security head at PayPal, as evidence of its commitment.

“We have learned a ton, mostly just how clear we need to be about our messaging and communicating what we actually do,” Schoenfelder said. “We are absolutely going to see legislative progress and we look forward to having very clear privacy protections and security protection for residents.”

What's next

The company last month closed a $126 million Series B investment round, led by Silicon Valley equity investor Avenir, along with Brookfield, RXR Realty, Tishman Speyer and a group of venture capital firms.

Latch plans to use the money to add staff and expand production. The company has raised $152 million since its founding, according to data kept by CrunchBase. The firm employs about 200 people, the majority of whom operate from Latch headquarters on the West Side.

Schoenfelder said Latch is increasingly targeting the larger market of existing apartment buildings. The National Multifamily Housing Council estimates there are about 20.8 million apartment units in the United States. Only 345,000 were constructed last year, according to census data.

“Whether it is making package delivery more efficient, getting groceries inside or helping to make an Airbnb-type stay more convenient,” Schoenfelder said, “we are focused on providing the infrastructure people need to do exciting new things with their spaces.”

Correction, Aug. 26, 2019: An earlier version of this article incorrectly stated that Latch's locks were included in one in every ten buildings, instead of apartments, under construction last year.

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